GoldSeek Radio Nugget - Bob Hoye: Central Banks Buy Gold to Hedge Against Inflation

Bob Hoye, Market historian and author from chartsandmarkets.com, outlines his case for a "Post-Bubble Contraction." Pls. add our show Q&A text number (24/7) to your friends list: (828) 554-1203

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Hoye comments on central bankers:

"And yes, all I have been reading is the general news releases that some central bankers have been acquiring gold. And I think that, probably, the main reason is that they are concerned about their own inflation. That's caused by themselves. But I doubt that any of the buying is wise enough to consider gold is the only reserve for a central bank. I doubt that they're there. I think it's probably just being worried about their own inflation that they're causing."

- Bob expects stellar results in gold mining and exploration shares as the undervalued sector draws the attention of deep-pocketed financial professionals.

He explains:

"As you know it, take the work I've done on gold's real price, deflated by the CPI. And I've got that on each bubble back to $1720 and the pattern is clear: During the bubble, gold's real price goes down. After the bubble, gold's real price goes up. Because it's money and most commodities fall relative to the bullion price and that then brings the costs of mining gold down. So, the price of gold and dollars doesn't matter.

It's the cost of mining the stuff that matters, and if you (the miners) have got falling costs, with equipment readily available, and miners being out of work and the base metal side – that's what makes the gold mining business very profitable in a post-bubble contraction."

- Gold shares could become increasingly competitive as mining costs decline relative to the exploding price of the underlying metals.
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- Bob has a list of his favorite junior mining stocks (send an email request to the host: gsradio@frontier.com).
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